Bank of America has paid $180 million in a settlement to resolve claims it helped rig the foreign exchange market. The Charlotte-based bank disclosed the settlement amount in a securities filing. The settlement had been announced in April by investors involved in the settlement. The investors – several pension and hedge funds – accused Bank of America and some other financial institutions of conspiring to manipulate benchmark trading rates in the foreign exchange market.
The antitrust class action alleged that this was part of a conspiracy to rig the approximately $5 trillion-per-day foreign exchange market. The bank said that it would use its existing reserves to cover the cost of settling the suit. The settlement is subject to court approval.
JPMorgan Chase & Co. and UBS AG settled the same lawsuit earlier this year, agreeing to pay $99.5 million and $135 million, respectively. The settlement amount is covered by existing legal reserves, Bank of America said in the filing. The settlement adds to the billions of dollars Bank of America has paid to resolve litigation since the financial crisis.
The lawyers representing Bank of America, as part of the settlement, agreed to cooperate in the Plaintiffs’ continuing investigation and litigation against nine remaining banks in federal district court in New York. At press time it was being said that Citi and Barclays are in settlement talks. Bank of America’s settlement should provide more ammunition for the Plaintiffs in their negotiations.
Judge Schofield rejected the banks’ claims that the U.S. Plaintiffs failed to bring enough evidence of a potential conspiracy, finding that the facts laid out in the complaint, including the existence of chat rooms where traders “congratulated each other on the manipulation of ‘the Fix,’” were enough that discovery and trial were needed to determine their veracity. “The Fix” is an industry term for the median price of a widely traded currency 30 seconds before market close that sets the closing price for the day. Judge Schofield wrote:
Even the names the FX traders gave their chat rooms — such as ‘The Cartel,’ ‘The Bandits’ Club’ and ‘The Mafia’ — support the inference that the chat rooms were used for anti-competitive purposes.
The Plaintiffs, including the Louisiana Municipal Police Employees’ Retirement System, filed their complaint alleging rigging of the $5.4 trillion-per-day foreign exchange market in 2012. It was alleged that the banks routinely charged pension funds the worst possible forex rates when processing transactions on their behalf. Other Plaintiffs filed similar class action complaints. They were eventually consolidated in New York district court. A series of enforcement actions from U.S. and other regulators resulted in about $4.3 billion in fines against the banks. This definitely helped the Plaintiffs’ claims. Discovery in the class action was stayed for six months as the U.S. Department of Justice continues its investigation into forex rigging. The case is in the U.S. District Court for the Southern District of New York.
Source: Bloomberg and Law360.com
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